For some family businesses, 2023 was a year to remember, while others hope it won’t be repeated.  Regardless of how your family business fared last year, 2024 is here.  What should you and your fellow directors be thinking about as the new year starts?

1 – What is your outlook for the economy?

Family business directors cannot control the economy, but they do have to navigate it.  Stock market returns, typically seen as a reliable leading indicator, were strong in 2023, with the S&P 500 advancing 24% during the year.  Recent results from the Richmond Fed’s CFO Survey suggest that corporate leaders are taking a more measured view.  Approximately 58% of respondents to the December 2023 survey reported optimism about the U.S. economy, up from a recent low of 50% in June 2022 but still lagging historical peak readings on the order of 70% (most recently in June 2021).  While many observers are confident that the Fed has successfully tamed inflation, global geopolitical tensions could derail the coveted soft landing.

2 – What do your customers need?

Identifying customer needs should always be a discussion topic, but the new year is a great opportunity to reassess your family business’s relationship with its customers.  What do your customers need from your business?  What pressures and opportunities are your customers focused on?  How does your corporate strategy align with your customers’ needs?  Most customer relationships aren’t lost overnight but grow cold slowly through inattention and failure to adapt to evolving customer needs.  Don’t let 2024 be the year customer engagement starts to wane.

3 – How do we maintain and grow our profit margins?

The inflationary cycle of the past several years has put many companies on the defensive, sacrificing profit margins to maintain staff in a hot labor market and prioritize product availability amid global supply chain disruptions.  Those tradeoffs may have been necessary to navigate the inflation-induced trauma of the early ‘20s, but sacrificing margin is not a sustainable long-term posture for any business.  Even companies that were “winners” of the inflation cycle should use 2024 to focus on preserving those margin gains so they don’t evaporate amid the return to a “normal” pricing environment.  Margins come from both pricing decisions and cost management.  While pricing decisions have been at the forefront in recent years, 2024 may be the time for family businesses to scrutinize costs, thereby institutionalizing more favorable margins.

4 – What is our M&A strategy?

After a soft 2022, deal activity remained subdued in 2023 as buyers and sellers elected to wait out the Fed’s rate hiking cycle.  Amid the consensus view that rates will begin receding at some point in 2024, transaction volume is likely to increase.  As a result, it is a great time to dust off your family business’s M&A strategy.  Are there holes in your product or service offerings that an acquisition could plug?  Are there opportunities for margin enhancement (see #3 above) through vertical integration?  Do you have any business segments that are no longer core to your family business’s overall strategy and, therefore, potential disposition candidates?  Are you prepared for an unsolicited bid to acquire your family business?  Are there changes in your family that make it an opportune time to sell the business?  Thinking through these types of questions in advance will increase the odds that any transactions you engage in during 2024 will be accretive to your family shareholders.

5 – What’s next?

Finally, what’s next for your family business?  What questions specific to your family business will need to be addressed in 2024?  Identifying these questions is where family business directors really bring value to their roles.  So-called “generative” artificial intelligence hogged the headlines in 2023 — what does that mean for your industry and your business?  What trends or innovations threaten to disrupt the way you’ve always done business?  Which popular topics in the business press generate more heat than light for your family business?

Any new year presents new opportunities and challenges for family businesses, and 2024 will be no different.  Ask the right questions now to make 2024 a year to remember.